Brussels, 29/02/2012 (Agence Europe) - European leaders will be meeting in Brussels on Thursday afternoon and Friday (1-2 March) for a European summit to discuss economic growth. They will be briefed on progress with the second Greek bailout, after the extraordinary meeting of the Eurogroup earlier on Thursday (see related article). The announcement that Ireland will be holding a referendum to ratify the budget pact that 25 member states are to sign on Friday will certainly be commented upon. Due to refusal by Germany to be more flexible, no decisions are expected about the size of the European financial backstop to prevent any further spread of the sovereign debt crisis and a special eurozone summit to discuss the matter has been cancelled (see EUROPE 10562). If all goes to plan, the European summit is expected to officially and unanimously recognise Serbia as an EU candidate country following the go-head recently from European foreign ministers (see EUROPE 10563).
The president of the European Commission, José Manuel Barroso, said on Wednesday 29 February that it was justified that the European summit should now focus on structural reforms to encourage growth. Asked whether such reforms would be compatible with the European social model, Barroso said it was a very difficult question because the European social model has to change to match a changing world, but Europe cannot solely be built on the idea of budget discipline, consolidation and responsibility. Convergence, growth and solidarity are also required. The president of the ECB, Mario Draghi, announced last week that the European social model was dead. Barroso called for a fairer sharing of sacrifices, such as with the Commission's work on financial taxation. In the invitation to the summit, the president of the European Council, Herman Van Rompuy, said that the real challenge was introducing the EUROPE 2020 strategy, and this is stressed in the draft European summit conclusions document (see EUROPE 10563). The Danish prime minister, Helle Thorning-Schmidt, commented: “We will promote a wide range of initiatives - including initiatives regarding the single market - to benefit both growth and employment.”
Barroso said progress had been made in other areas of the debt crisis, such as budget discipline (revising the stability pact and agreeing on the budget pact); financial stability, with proactive decisions by the ECB (two bank refinancing operations over three years, €490 billion raised in December 2011 and €530bn on Wednesday 29 February); the European firewall (leverage effect for the EFSF and the ESM will soon come on line). On the question of the adequacy of the firewall, Barroso said the matter would be decided in March, ahead of the G20 Finance summit in April. Pointing out that key economic players felt more confident and that there had been a change of perception on the European Council, Barroso said he was nevertheless extremely cautious about Europe's ability to return to economic growth. The Commission forecasts zero growth for the EU27 in 2012 and a slight contraction of the eurozone (by 0.3% of GDP).
Irish referendum. Asked about the announcement of a referendum in Ireland, Barroso said that it was for member states to decide how to ratify the budget pact (see EUROPE 10542). He agreed with the Irish
prime minister, Enda Kenny, that ratification of the budget pact would boost confidence in the Irish economy. An Irish “no” vote is not a worry for many delegations because as soon as 12 countries have ratified the budget pact in the eurozone, then it will come into force. They hope that the Irish government will be able to convince people to vote “yes” because financial aid from the permanent ESM bailout fund will only be available for countries that have ratified the budget pact. (MB/transl.fl)